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Draft AgriBEE sector codes – BEE Measurement

Draft AgriBEE sector codes – BEE Measurement

The Western Cape Department of Agriculture (WCDoA), through the UTA, has sought the services of an external service provider for BEE measurement and verification for select Comprehensive Assistance Support Programme (CASP) funding applicants. This data will enable the WCDoA to have a very good sense of how much “real” empowerment has taken place in these different projects that have previously been supported, or may be applying for support. The service provider will apply the stipulations of the new AgriBEE Sector Charter and the new generic Codes of Good Practice when performing this measurement.

The relevance and importance of this project stems from an imperative to address the legacy of Apartheid, where there was a racially motivated and deliberate action of apportioning economic opportunities to South Africans, which led to disparities in the socio-economic development according to race. The South African government post 1994 had to introduce direct intervention in the distribution of assets and opportunities, which was deemed inevitable and the central pillar of this intervention became Black Economic Empowerment (Robinson et al., 2007).

 

According to the Broad-based Black Economic Empowerment (BBEE) Act (Act 53 of 2003), BBEE is the economic empowerment of all black people (Africans, Coloureds, Indians, and Chinese South Africans who were present before 1994) through diverse but integrated socio-economic strategies. The BEE Act, also sought to reward the entities that were adhering to the prescripts of the Act in order to encourage participation through government procurement processes. However, this gesture was being misused in a number of cases where the placement of black people in strategic decision making positions, or as shareholders in an entity was a mere façade for window dressing or fronting and tokenism, when in actual fact, the appointees did not have any decision making powers. Since fronting was not defined in the 2003 Act, dishonest behaviour was prosecuted as fraud.

The Broad-Based Black Economic Empowerment Amendment Act, 46 of 2013, in addition to making fronting a criminal offence, also defined fronting in broad terms as following:

  1. Where black people who are appointed to an enterprise are discouraged or inhibited from participating substantively in the core business of that enterprise;
  2. Where benefits received by an enterprise as a result of its BEE status, do not flow to black people in the ratio specified in the relevant legal documentation;
  3. The conclusion of a legal relationship with a black person in order to achieve a certain level of BEE compliance without the economic benefits that would reasonably be expected to flow from that status / position being granted to the black person;
  4. The conclusion of agreements with other enterprises, in order to achieve BEE status in certain defined circumstances.

To curb the above tendencies, the government revised the BEE Scorecard to rate entities according to the real empowerment that takes place within that entity.

The appointed service provider will focus on the following documents in order to evaluate the selected projects:

  • For private companies, the following is scrutinised:
    • Share certificates and register if applicable
    • Shareholders agreement
    • Sale of Shares Agreement
    • Memorandum of Incorporation / Articles and Memorandum of Association together with all resolutions effecting changes to these documents
    • Certified Identity Documents of shareholders (Individuals)
    • BEE certificate for shareholders if applicable
    • Auditors letter confirming the outstanding acquisition debt balance.
    • Valuation of the entity should there be outstanding acquisition debt  
  • For Trusts, Broad based ownership Schemes( BBOS) and Employee Ownership Schemes (ESOP) the following will be needed:
    • Trust Deed and / or Scheme rules
    • Letter from a competent person confirming that the Trust was set up for legitimate business reasons and not to circumvent the provisions of the Codes or Act
    • List of beneficiaries of the trusts

 

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